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As of the latest reported tax data from the IRS, the average
American can expect to receive a tax refund of nearly three thousand
dollars. For many, three thousand dollars is a windfall and you
might be tempted to spend it in less than responsible ways.

Fortunately, there are plenty of ways you can smartly use that
refund to help improve your financial situation.

Pay Down Debt

If you are carrying debt, especially high interest credit card
debt, consider taking a small part of your refund and paying down
your credit card debt. Credit card debt interest is typically in
double digits and any sizable balance can have an extremely
negative effect on your finances. Paying off credit card debt can
often take many years, especially if you are charged high
interest rates, and being able to pay off a large amount can help
lighten that burden.

Before you consider investing the money in the stock market,
invest it in yourself and your future by paying down debt. It
won't be as exciting as investing in shares of Apple, but you're going to get a better return.

Save It

If you're fortunate not to have any high interest debt, put some
of that money away for a rainy day. A lot of people like to get
refunds because they see it as forced savings, not lending money
to Uncle Sam for free, and in that respect it's a reasonable
strategy. With interest rates on savings accounts so low, you
aren't surrendering too much through over withholding.

That said, you have to save the money after you get it for the
strategy to make any sense! If you don't have an emergency fund,
use some of your refund to start one. If you haven't started a
house fund, and intend to buy one in the future, peel off a
little for that. Start thinking about your future savings goals
and start saving for them today.

Invest It

Once you've saved a little for a rainy day and paid down your
debt, think about ways for that money to grow. That could be
investing in the stock market, using tools like mutual funds and
ETFs. It could be increasing your 401(k)
contributions at work and covering the difference with your tax
refund. It could simply be putting it in certificates of deposit,
which isn't technically investing, or some other safe vehicle
that accrues interest over time. Whatever it is, take some time
to research your options and put your money wherever it makes
sense.

Treat Yourself

Finally, and most importantly, treat yourself. If you've done the
responsible thing and paid down debt, put some towards savings,
and even invested a bit, take the rest and do something fun. It's
important to treat yourself every once and a while so that you
can continue being responsible when the time calls for it.
Finances are a lot like diets. You need cheat days to keep you
sane and on track.

Whatever you decide to do, you'll be fine as long as you have a
plan and stick with it.